Question

PLEASE NO COPIED OR HAND WRITTEN ANSWERS

Describe what directly impacts the cash flow of a business?

Answer 1

The factors that impact the cash flow of a business are mentioned as below

1.Debtors i.e.,Accounts receivable which are the unrealised part of credit sales made by an organisation during a period of term.

2.Creditors I.e., Accounts payable which indicates the percentage of amount of inventory that we purchased for the purpose of business.The relationship with the trade payables and the cash flows is always directly proportional i.e., with the increase in creditors the cash inflow will be increaes and in the same way the cash inflow decreases with the decrease in creditors.

3.The credit period also plays a very important role in determination of cash flows of an organization.The change in the terms may bring a change in the cash flows too as the credit period can increase the debtors or decreases them which inversly decreases or increases the cash flows.

4.Inventory also forms a great part while determination of movement of cash flows in an organisation.This has an inverse relationship with the cash flows.

In simple words,

Current assets and the current liabilities are the items that form part of operating changes while calculating cash flows.The current assets are inversly related with the cash flows but where as the current liabilities are directly related.